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Energy price cap will begin in January 2019

11 million households affected would save more by switching gas and electricity supplier

The date the energy price cap will take effect has finally been confirmed. From 1 January 2019, customers on poor-value default tariffs will have their bills capped.

Energy customers who use an average amount of gas and electricity will pay a maximum of £1,137 per year, says energy regulator Ofgem. This is £1 more than the original level of the cap proposed in September.

Customers on default tariffs are expected to save £76 per year, on average, or up to £120 on the most expensive tariffs affected.

If your bills are cut by the cap it doesn’t mean you’re on a good deal however. The cheapest deal currently costs £259 less per year than the cap, and it’s no guarantee that your bills won’t rise further.

The level of the cap is set to be reviewed in April – so if the costs of supplying electricity and gas have increased, the cap can be raised, too.

Am I affected by the energy price cap?

If you’re on a default tariff with your energy company, this cap will apply to you. You’ll likely be on a default tariff if you have never switched energy company or tariff, or if you took no action when your last fixed deal ended.

You bills will be capped if your company’s charges exceed those allowed under the cap. Some companies will be cut more than others; check if yours is listed below.

Scottish Power customers on its default tariff are set to save the most because its default tariff is currently the priciest of the big firms. SSE customers will see a saving of half the amount since its standard variable default tariff is cheaper.

Customers who prepay for energy or who receive the Warm Home Discount (WHD) already have their bills capped under the safeguard tariff cap. WHD customers will have their bills capped in line with this new cap once it comes into force.

Although the level of the cap is set at £1,137 per year, it’s important to know that this is an illustration, based on a household which uses a medium amount of gas and electricity and pays by direct debit.

In fact, the cap is a limit on what companies can charge on certain elements of your bill. It’s not a cap on the total amount you can be charged. How much you pay still depends on the amount of gas and electricity you use, where you live, your current tariff and how you pay.

Will the cap increase in April?

The level of the cap will be reviewed every six months by Ofgem. The first review will be in April and will reflect the latest estimated costs of supplying electricity and gas, according to Ofgem.

It’s likely that the cap will increase. Ofgem said: ‘Wholesale costs have risen significantly over the past year. If this trend continues, it’s likely that in February Ofgem will announce an increase in the level of the cap to take effect in April.’

Ofgem first proposed the level of the price cap at £1,136 per year in September. It has increased the level by £1 to account for the costs of:

replacing traditional meters with smart meters

wholesale gas that is lost en route to being delivered to people’s homes

methodology corrections

lower costs for customers paying by direct debit, compared with cash or cheque.

Which? on the energy price cap

Alex Neill, Which? managing director of home products and services, said: ‘Which? research has previously found that the cap won’t cut bills for customers on three in ten dual-fuel deals, so while the price cap will ease the financial burden for some households, people shouldn’t be lulled into a false sense of security that it will mean they are getting the best deal. Switching is still the best way to save money on your energy bills.

‘The price cap can only be a temporary fix; what is really needed is more competition between suppliers to help drive the innovation that is so desperately required. In the meantime, Which? will continue to monitor the energy market closely and put pressure on suppliers to improve the service they provide their customers.’

Which? energy pricing research

Prices are based on a dual-fuel tariff available in all regions in England, Scotland and Wales paying by monthly direct debit, with paperless bills.

Energy usage is based on Ofgem’s annual average figures for a medium user (12,000kWh gas and 3,100kWh electricity) and high user (17,000kWh gas, 4,600kWh electricity), as stated. Data is from Energylinx.

Prices given are averages across regions, are rounded to the nearest whole pound and correct on 1 November 2018.